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3#
发表于 2011-7-11 19:15
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Decreasing quality spreads sounds like a bad thing, but it is actually a good thing for the company you are valuing. The quality (credit) spread decreasing tells you corporate yields are going down from investors bidding up corporate bonds. and comparable government yields are increasing and treasury prices falling due to investors moving money into riskier assets.
Basically investors who would only borrow from a BBB rated corporation for 10 YR at 5% before are now comfortable borrowing at 4%.
If you remember from the Bond Yield + Premium approach of equity valuation, you will recall that required return assumptions on an equity can be made by just tacking on equity risk premium to the yield of your corporate bonds. So anytime the quality spread decreases, your bond yield goes down, and required return goes down too as there is less risk. Your discount rate goes down, so your valuation goes up.
Edited 1 time(s). Last edit at Saturday, February 5, 2011 at 11:12PM by EastCoastJ. |
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